Girl Power? Investment Trends for Female Entrepreneurs on Shark Tank (US)
Data Science 1 with R (STAT 301-1)
Introduction
Throughout the corporate sector, female entrepreneurs tend to face greater barriers and often have their businesses undervalued and underrepresented. Many female entrepreneurs find it difficult to break into male-dominated industries, to obtain similar investments to their male counterparts, and to receive the same respect as male entrepreneurs. Additionally, industries with greater representations of women are often viewed as less lucrative, less serious and less deserving of investment.
The reality television show Shark Tank (US) broadcasts real-time deals being made between entrepreneurs pitching their businesses to a panel of investors, called sharks. The show, having run for over a decade, provides a glimpse into the business world for viewers and a wealth of information about how entrepreneurs– both male and female– are treated by investors.
In this EDA, I intend to find if there are differences between the investment and pitching trends of female entrepreneurs, male entrepreneurs, and sharks. Specifically, I aim to determine if female entrepreneurs are represented as often as male entrepreneurs in the show and which industries featured on the show tend to attract more female entrepreneurs (female-dominated industries). Additionally, I intend to determine if female entrepreneurs ask for similar amounts of investment, valuation, and equity in their businesses as male entrepreneurs, if female entrepreneurs receive investment as often as male entrepreneurs, and if that investment aligns with their initial demands (i.e. quality of investment). Finally, I intend to determine which sharks invest in female entrepreneurs more often and which sharks tend to invest more in female-dominated industries.
Data overview & quality
A concise high level overview of the dataset(s) being explored. Description of the dataset(s) that covers basics: size, number of observations, number, of variables, variable types, and discussion of any quality issues (especially missingness and how it may impact the analysis). Highlight any important data collection issues or concerns. If over-technical, but important, then place technical details in Appendix: technical info.
Demographics
Women are often underrepresented in positions of authority, especially as entrepreneurs. In Figure 1 Shark Tank (US) seasons 1-14, it is clear that women-led businesses are outnumbered by male-led businesses. Mixed gender entrepreneur teams are represented even less. This gender imbalance might limit viewers’ exposure to female entrepreneurs and hinder their acceptance of women in positions of power, especially in business.
In Figure 2, the industries most represented include Food/Beverage, Fashion/Beauty, and Lifestyle/Home. Some of these businesses are typically associated with women, like Fashion/Beauty, but representation in leadership roles is rarely dominated by women.
In Figure 3, Industries with female entrepreneurs represented on shark tank (US) seasons 1-14 show that women are most involved in Food/Beverage, Fashion/Beauty, Children/Education and Lifestyle/Home industries. Three industries do not have any female-run businesses represented: Automotive, Electronics, Liquor/Alcohol.
Figure 4 indicates that only one industry on Shark Tank (US) has more female-led businesses represented than male or mixed team led businesses: children/education. All other industries have a greater representation of male entrepreneurs than female entrepeneurs and mixed teams. Representation of female entrepeneurs is better in Fashion/Beauty, Health/Wellness and Pet Products industries, but male-entrepeneurs are still represented more often. Representation of female entrepreneurs is the worst in the Automotive, Electronics and Liquor/Alcohol industries. In particular, Liquor/Alcohol does not have any female-led or mixed-team led businesses represented at all.
The bias in gender-representation in Shark Tank (US) could have additional effects, including how frequently deals are made for different genders, the quality of the deal, and how individual sharks behave towards different genders of entrepeneurs.
General Deal Trends
Deal Frequency
Figure 5 shows that generally on deals are made in about 60% of pitches from Season 1-14 of Shark Tank (US). However, this frequency of deals made might change based on gender.
According to Figure 6, female entrepreneurs receive deals more often than their male counterparts, approximately 64% and 57% of the time respectively. Mixed gender entrepreneur teams actually make deals more than both female and male entrepreneurs (65% of the time). This imbalance in number of deals made might reflect that women-led and mixed-team led businesses are simply underrepresented on Shark Tank. Since male-led teams are represented more often, they might be more likely to be rejected, lowering their ratio of successful to unsuccessful pitches. This higher rejection rate for male entrepreneurs might also reflect different deal-making strategies that are to be explored further.
According to Figure 7, Automotive, Lifestyle/Home and Uncertain/Other industries seem to make deals most often, making deals 77%, 67% and 67% of the time. One of these industries–Lifestyle/Home–has a strong representation of female entrepreneurs. However, the Automotive industry lacks representation of any female entrepreneurs despite making deals the most often out of any industry.
Requested Investment, Equity and Valuation
Before a deal is made on Shark Tank, entrepreneurs have to pitch their business and their requested investment, offered equity, and estimated valuation of their business.
According to Figure 8, the typical investment requested on Shark Tank (US) is approximately 200,000 USD. However, there is slight variation in the requested investment’s distribution, with the most requested 100,000,000 USD and the least 40,000 USD. The distribution is skewed right somewhat as well.
In analyzing how requested investment on Shark Tank (US) varies by gender, Figure 9 shows that male entrepreneurs and mixed gender entrepreneur teams typically request 50,000 USD more than their female entrepreneur counterparts. Female entrepreneurs also request 50,000 USD less than the general population. This difference in requested investment might be explained by different equities offered or different typical valuations of their businesses that are to be analyzed.
Figure 10 shows the typical offered equity during a pitch on Shark Tank (US) is approximately 10 percent. There is some slight variation, with the most offered being 100 percent (indicating the business owner would like to be bought out) and lease offered being 1 percent. The distribution of equity offered is skewed right, with a peak at approximately 10 percent. It is important to investigate, however, if this offered equity is uniform across all genders.
According to Figure 11, the typical offered equity during a pitch on Shark Tank (US) for female entrepreneurs is 12%, while the typical offered equity for both male and mixed gender entrepreneur teams is 10%. Female entrepreneurs typically offer 2% more in equity than both the general population and their male and mixed gender entrepreneur counterparts. The general distribution of offered equity appears to be the same across all genders, with a peak around the median equity offered and a slight right skew. Given that female entrepreneurs both offer more equity and request less in investment, it is likely that they undervalue their businesses compared to male and mixed team entrepreneurs.
The typical initial valuation requested on Shark Tank is approximately 1,500,000 USD, according to Figure 12. The distribution of the requested valuation is skewed somewhat right with a peak slightly below this typical valuation. The greatest valuation requested is approximately 100,000,000 USD, while the lowest is approximately 40,000 USD. Given the differences in requested investment and equity offered across entrepreneur gender, it is expected that this requested valuation should differ for female, male and mixed gender entrepreneur teams.
According to Figure 13, businesses run by female entrepreneurs are valued typically at 1,000,000 USD, while male-run businesses are valued at 1,666,667 USD and mixed gender-run businesses are valued at 2,000,000 USD. The distributions of these businesses are similar, each with a right skew and a peak slightly below the median valuation. The range of valuations requested are somewhat similar, with male-run businesses having a lowest requested valuation value of 40,000 USD and highest of 100,000,000 USD. Female-run businesses have 85,714 USD and 25,000,000 USD respectively. Mixed-gender teams have 100,000 USD and 25,000,000 USD respectively.
Overall, it is clear that female entrepreneurs typically request less in investment, offer more in equity and value their businesses less than their male and mixed-gender team entrepreneur counterparts. However, it is unclear why exactly. Is it because female entrepreneurs are more conservative in their assessment of their company’s worth? Do male and mixed gender entrepreneurs overvalue their companies? Exploring what investment, equity and valuation these entrepreneurs receive when they make deals can provide some insight.
Received Investment, Equity and Valuation
The investment received after a deal on Shark Tank is a strong indicator of the success of a pitch on the show.
In Figure 14, the typical investment for entrepreneurs that received deals on Shark Tank (US) is approximately 200,000 USD. The distribution of this typical investment is skewed somewhat to the right, with a peak slightly below this typical value. The greatest investment received is approximately 5,000,000 USD and least investment received is approximately 10,000 USD.
In Figure 15, typical investment for male entrepreneurs is approximately 50,000 USD more than for female entrepreneurs. Mixed gender entrepreneur teams receive a typical investment of 250,000 USD, greater than both female and male entrepreneurs. Female entrepreneurs receive typical investments 50,000 USD less than the general population. The distribution of the typical investments are similar across genders. Is this an instance where female entrepreurs give less equity or have lower business valuations?
According to Figure 16, for all deals made on Shark Tank (US), the typical equity received by the shark is approximately 20%, much greater than the typical equity requested, with a peak at 20% and a very slight skew to the right. The greatest equity received is approximately 100% (complete buy-out) and lowest is approximately 2%. Since the typical investment received approximately matches the typical investment requested, this discrepancy in equity received and equity offered might indicate that many sharks overvalue their businesses. This will be further explored in their valuations.
In Figure 17, it is clear that female entrepreneurs typically give more equity (25%) than the general population (20%), male entrepreneurs (20%), and mixed entrepreneur teams (22%). The distributions of these equity values are fairly similar, with peaks around the median equity values and very little skew. The highest equity given for all genders is 100%, indicating a buy-out. The lowest equity given for female entrepreneurs was 2.5%, for male entrepeneurs was 2% and for mixed gender teams was 3%. This difference in equity indicates that while female entrepreneurs receive less investment than their male counterparts, they actually give more equity. Additionally mixed gender teams receive much more investment than female entrepreneurs but only offer slightly less equity. This indicates that female-run businesses could be valued differently than male-run or mixed-team run businesses. Futher analysis is required.
In Figure 18, the typical valuation received after a deal on Shark Tank is 1,000,000 USD. The lowest valuation received is approximately 14,286 USD and highest 36,000,000 USD. The distribution of valuation received is skewed to the right with a peak slightly below 1,000,000 USD. This differs substantially from the typical requested valuation of 1,500,000 USD, indicating that perhaps many entrepreneurs overvalue their businesses while pitching.
According to Figure 19, the typical valuation received for female entrepreneurs (666,667 USD) is less than that of male entrepreneurs (1,000,000 USD) and mixed gender teams (1,035,714 USD). This is in alignment with the gender differences seen in equity (more equity given for female entrepreneurs) and investment (less investment received for female entrepreneurs). Why does this occur? Are female entrepreneurs undervaluing their businesses or do male entrepreneurs and mixed teams overvalue their businesses? Perhaps it is an instance where female entrepreneurs ask for less and therefore receive less? Exploring the differences in requested and received investment, equity and valuation for each pitch could provide some insight.
Pitch Success
The success of a pitch can often be measured by how in line with the pitcher’s expectations the investment, equity and valuation agreed upon are. Given the differences across gender with the typical requested investment, equity and valuation and typical received investment, equity and valuation, investigating how these values align or differ for each pitch is critical.
In Figure 20, the typical difference in investment received and requested in USD is approximately 0 across all genders, indicating that most investments received are in line with expectations set out in the pitch. The distribution of investment differences are similar across all genders, with peaks at approximately 0 USD and some greater variation below 0 USD and very few investment differences above 0 USD. This indicates that perhaps in instances where female entrepreneurs are receiving less investment, it could be because their typical investment expectations are less than that of male entrepreneurs. However, further analysis is to be conducted on whether this lower investment amount impacts equity and valuation differences.
According to Figure 21, the typical difference in equity for female entrepreneurs (5%) is approximately the same as their male counterparts (5%), indicating that they end up giving approximately 5% more equity than initially proposed. Mixed gender teams end up giving approximately 7.5% more equity than initially proposed. The distributions of equity difference are similar across all genders, with a peak slightly below the median equity difference and a fairly symmetrical distribution. Given that the differences in equity and difference in investment are similar between male and female entrepreneurs, perhaps investment and equity received differences are due to different initial expectations set forth in the pitching process.
In Figure 22, the typical difference in valuation received and requested is less for female entrepreneurs (-333,000 USD) than their male entrepreneur (-502,000 USD) mixed gender team (-600,000 USD) counterparts. The distributions of the valuation difference are similar across all genders, with a slight left skew and a peak slightly above the median valuation difference. The range of valuation differences is similar across all genders, with the most positive differences being 1,2500,000, 4,000,000, and 4,000,000 USD for female, male and mixed gender entrepreneur teams respectively. The most negative differences being -13,750,000, -25,000,000, and -16,666,667 USD for female, male and mixed gender entrepreneur teams, respectively. These differences in typical valuation difference indicate that perhaps female entrepreneurs have a more accurate initial estimate of what their business is actually worth compared to male and mixed gender team entrepreneurs. Additionally, it could indicate that male entrepreneurs and mixed gender teams overvalue their businesses in the initial pitches. Regardless, female entrepreneurs often leave pitches with valuations more in line with their expectations than male and mixed gender teams.
Shark Trends
Individual shark behavior is important to analyze as well, understanding if they are more likely to invest in female-led businesses and female dominated industries. Additionally, analysis of how a shark’s own gender bias plays a role in their investing is critical.
Shark Investment Frequency
Barbara Corcoran
In Figure 23, Barbara Corcoran makes deals approximately 9.3% of the time when pitched to, passing on 90.7% of pitches.
Mark Cuban
In Figure 24, Mark Cuban makes deals approximately 18.1% of the time when pitched to, passing on 81.9% of deals.
Lori Greiner
According to Figure 25, Lori Greiner makes deals approximately 15.6% of the time when pitched to, passing on 84.4% of deals.
Robjert Herjavec
In Figure 26, Robert Herjavec makes deals approximately 9.6% of the time when pitched to, passing on 90.4% of deals.
Daymond John
According to Figure 27, Daymond John makes deals approximately 8.8% of the time when pitched to, passing on 91.2% of deals.
Kevin O’Leary
In Figure 28, Kevin O’Leary makes deals approximately 9.2% of the time when pitched to, passing on 90.8% of deals.
Overall, when pitched to most sharks make deals less than 10% of the time, with the exception of Mark Cuban (18.1%) and Lori Greiner (15.6%). Daymond John makes deals the least often (8.8% percent of pitches). However, of the deals made, how many of them are women-run businesses? Are male investors less likely to make deals with women?
Investment in Women-Run Businesses by Shark
Of the deals made, it is important to investigate the proportion of them that are women-run businesses.
In Figure 29, it is clear that female sharks– including female guests, Barbara Corcoran and Lori Greiner–invest in women more often than male sharks. These differences are likely not due to differences in frequency of investing. Even when compared to sharks that invest similar amounts, female sharks invest more often in female-run businesses than male sharks.
Industries Favored by Female vs. Male Sharks
Since it is clear that female sharks invest in female-run businesses more often, can the same be said for female-dominated industries?
According to Figure 30, the industries preferred by female sharks include: Lifestyle/Home, Food and Beverage, Fashion/Beauty and Children/Education. Most of these industries are industries with greater representation of female entrepreneurs, especially Children/Education which has more female entrepreneurs than male (according to Figure 4).
According to Figure 31, the industries preferred by male sharks include: Food and Beverage, Lifestyle/Home, Fashion/Beauty and Fitness/Sports/Outdoors. Some of these industries are industries with greater representation of female entrepreneurs. However, the only truly female-dominated industry, Children/Education, is preferred less by male entrepreneurs than female entrepreneurs.
Conclusions
State conclusions or insights. Were you surprised by things you found or were they as expected? Why? This is a great place for future work, new research questions, and next steps.
According to this analysis, there are some differences in the experience of female and male entrepreneurs on Shark Tank (US) seasons 1-14.
Follow-up studies may be done to see how these trends change over time. Perhaps in the years the show has been on the air the treatment of female entrepreneurs has changed or the investment trends of sharks has changed. Additionally, I might conduct further study to see if a male partner improves female entrepreneur investment outcomes and if a female partner worsens male entrepreneur investment outcomes.
References
Thirumani, S., Rehman, A.U., and Molagoda, J., 2023, Shark Tank US dataset, https://www.kaggle.com/datasets/thirumani/shark-tank-us-dataset